Abstract
A common wisdom asserts that the wider the universe of assets to choose from, the greater the investor's welfare. We show that this is not the case in practice, where parameters have to be estimated even when the estimates are unbiased. Surprisingly, risk aversion plays a crucial role corresponding to the desirability of asset expansion by dividing investors in three groups: investors with very low risk tolerance and investors with very high risk tolerance are better-off with asset expansion, and investors with moderate risk tolerance are worse-off despite the option to refrain from investing in the additional asset.
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